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Measuring our triple bottom line
Strength. Performance. Passion.
Integrated Profit and Loss Statement 2014
Bernard Fontana
CEO
Thomas Aebischer
CFO
This IPL statement gives us an indication of the scale of our extended impacts and provides a compass pointing us in the direction of increasing sustainable value creation for shareholders, society and the environment. I believe that it is a good addition to the rest of our public reporting and will become more and more useful over the years when we can show a trend.
As part of the Holcim Sustainable Development Ambition 2030, Integrated Profit and Loss (IPL) statements were calculated for three Group companies. This helped in identifying where the most potential exists not just to reduce impacts, but to add value across the triple bottom line. We have now prepared the first IPL calculation for the Holcim Group as a whole. This provides a broad picture of where the Group needs to act to create even more value for all stakeholders.
Measuring our triple bottom linePeople, planet, profit
THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
INTRODUCTION
2 Integrated Profit and Loss Statement 2014
To achieve our long-term sustainability ambitions, we must establish where we need to focus our efforts so that we can maximize our financial, socio-economic and environmental value creation. With this aim, we have endeavored to measure the impact of our operations across the triple bottom line: people, planet and profit. The result, the first Holcim IPL statement, is shown in the following pages.
Introduction
The statement is a tool to allow us to understand –
and share with stakeholders – the extent of our
impacts on society and the environment, and to track
progress against the Holcim Sustainable Development
Ambition 2030.
We believe that the tool will enhance our decision-
making processes and sustain value creation in the long
term, by raising awareness of the risks and opportunities
posed by externalities (through quantification and
monetization). The process will allow us to bring the
three dimensions of people, planet and profit into our
investment decision-making and to compare options
under different scenarios.
By using this tool, we seek to build an objective and
transparent base, for better strategy setting and better
decision making. The statement and methodology,
developed in conjunction with KPMG*, depends on
a set of assumptions. The main assumptions used in
calculating the statement are shown in the assumptions
section on page 9. We are aware that these assumptions
can, and indeed should, be challenged. By publishing
this statement, we seek to contribute to the debate and
the discussion on developing robust methodologies for
companies and sectors to measure and report on the
financial value, positive and negative, of externalities.1
We need to focus our efforts so that we can enhance the value we add to people, profit and the planet.
1 An externality can be defined as an economic, social or environmental benefit that a company creates for society for which it is not directly or fully rewarded in the price of its goods and services or an economic, social or environmental cost that a company inflicts on society for which it does not directly pay a price.
* KPMG Barend van Bergen Global Head of Sustainability Advisory Phone +31 2 0656 4506 vanbergen.barend@kpmg.nl
KPMG Frits Klaver Senior Consultant Sustainability Services Phone +31 6 5275 7798 klaver.frits@kpmg.nl
3 Integrated Profit and Loss Statement 2014
INTRODUCTION THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
This glossary contains a definition of the terms used in the IPL. It should be used in conjunction with the assumptions section of the report and the annex, where the calculations and prices used in the statement are detailed.
Glossary
Air emissions – emissions to air other than CO2 – for
example, NOx, SO2 and dust emissions.
Biodiversity – the variety of plant and animal life in a
particular habitat. In the IPL we consider both negative
impacts (hectares of land disturbed) and positive
impacts (hectares of land rehabilitated).
CO2 downstream – CO2 emissions reduced as a result
of the use of our products and services down the value
chain. We are still developing the methodology to
measure this and will report in future IPLs.
CO2 upstream and own operations – Scope one and
two CO2 emissions resulting from the manufacturing
of our products, including those occurring from purchased
goods and services – ie: electricity purchases and logistics.
Environmental incidents – events leading to significant
environmental damage such as oil or pollutant spills.
There were no such incidents reported by Holcim Group
companies in 2014.
Externality – an externality can be defined as an
economic, social or environmental benefit that a company
creates for society for which it is not directly or fully
rewarded in the price of its goods and services or an
economic, social or environmental cost that a company
inflicts on society for which it does not directly pay a price.
Inclusive business – inclusive business initiatives are
initiatives that keep their “for profit” nature, while
contributing to addressing social problems by including
customers at the base of the pyramid.
Industrial accidents – fatalities or injuries sustained by
employees, contractors or third parties occurring as a
result of Holcim activities.
Retained value – the sum of capital retained in a business.
We have calculated this as EBITDA minus taxes, interest
paid and dividends. Further details, including references
to the relevant sections in the Holcim Annual Report and
Accounts 2014, can be found in the assumptions section.
Secondary resources – alternative fuels and raw
materials used. This includes:
• Alternative fuels to replace traditional fossil fuels in
the manufacturing process – for example waste
derived fuels.
• Alternative materials used in the composition of our
products – for example mineral components such as
blast furnace slag or bottom fly ash to replace clinker
in cement, or alternative aggregates such as washed
copper slag in concrete.
Stakeholder value – the quantified benefit to society
at large from the provision of salaries, the payment of
direct and indirect taxes, interest paid to creditors and
dividends to shareholders.
Strategic social investment – these are investments that
sustainably improve people’s quality of life, by enabling
the implementation of activities in the areas of education,
community development and infrastructure, contributing
to capacity building and empowerment of stakeholders.
Skills out – an estimate of the wider social benefits of
training and development - the social benefits derived
from the skills of our former employees.
Waste – the waste generated as a result of our business
activities that is either landfilled or incinerated. See the
assumptions section for further details. Waste that is
co-processed in our kilns as an alternative fuel is
included under “secondary resources.”
4 Integrated Profit and Loss Statement 2014
INTRODUCTION THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
GLOSSARY
With the IPL we are able to quantify the proven
benefits of these solutions. When compared to other
products, they offer superior environmental and social
performance in the manufacturing, use and disposal
phases of buildings and other infrastructure. In
particular, these solutions will help us to take advantage
of the growing number of opportunities arising in the
sustainable and resilient construction segment.
The Sustainable Development Ambition 2030 contains
aspirations and intermediate targets in three main areas
– Climate, Resources and Communities – as detailed by
the diagram left.
The IPL tracks how the initiatives, products and
solutions we have developed to grow our Sustainability
Enhanced Solutions portfolio add value across the triple
bottom line.
With the increasing focus on “integrated reporting,”
the IPL provides a basis for a discourse on how all a
company’s resources and activities are impacting
value. It will help businesses to think holistically about
their strategy and plans, make informed decisions and
manage key risks to build investor and stakeholder
confidence and improve future performance.
Why an IPL?
• Achieve no net increase in absolute carbon emissions vs 2013 across the lifecycle
2030
Solutions
The IPL was developed in the context of the Holcim Sustainable Development Ambition 2030. The Ambition, published in June 2014, is aligned with our vision “to provide foundations for society’s future.” The overarching aim of the Ambition is to significantly increase interest in, and the uptake of, our innovative range of sustainability enhanced solutions. The Ambition states: “By 2030, we aspire to generate one-third of our revenue from our portfolio of Sustainability Enhanced Solutions.”
5 Integrated Profit and Loss Statement 2014
INTRODUCTION THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
WHY AN IPL?
The study showed that, overall, ACL has a positive
net financial impact on environmental and social
externalities, but highlighted where the company
needs to invest in reducing negative values –
especially in the environmental domain.
The tool was used to identify where 1 US dollar invested
would bring the highest societal return. The study
specifically demonstrated that ACL could profitably
maximize its “true value” by focusing its resources
on reducing carbon emissions, water and further
expanding its social engagements. Further details of the
ACL project can be found in its 2013 sustainability report,
available online (www.ambujacement.com).
Implementing the Sustainable Development Ambition
2030, including an IPL statement, was piloted in 2014
by three Holcim Group companies: Holcim Costa Rica,
Holcim Indonesia and Aggregate Industries (UK). The
aim of the pilots was to establish how we can translate
our Ambition into actions, how much this will cost and
what the Ambition will bring to the Group.
Piloting for success
The IPL was initially piloted in 2013 by Ambuja Cements (ACL), our Group company in India, in conjunction with KPMG. Its “True Value” project estimated the positive and negative impacts of specific areas, such as water use and rainwater harvesting, carbon and other emissions, the use of alternative fuels and raw materials, and the estimated economic value added to society.
We have to combine the financial and quantified externality data that can help us measure the value a company creates holistically. We also need data about the value we create, as the future belongs to those industries that can anticipate resource depletion and take corrective action. The business community must assess how much value it creates, as a measurement-led approach to sustainability will be the cornerstone of all businesses in the future.
Ajay Kapur CEO Ambuja Cements Ltd, India
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INTRODUCTION THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
PILOTING FOR SUCCESS
An emerging discipline
A brief history of triple-bottom-line accounting
The concept of triple-bottom-line (or people, planet,
profit) accounting is not a new one: it’s been around
for at least 30 years.
The idea was first proposed in academic papers in the
1980s; the Dutch IT firm BSO/Origin issued what are
widely believed to be the first environmental accounts
in 1990. Since then, several companies, academics,
business organizations and others have developed
the approach. Notable milestones include the 2006
publication of Michael Porter’s Creating Shared Value
paper in the Harvard Business Review and the launch
of a full Environmental Profit & Loss account by
sportswear brand PUMA in 2010.
Today, many of the biggest names in the business
world are actively working toward the quantification
of non-financial (social and environmental) value
in financial terms. Many are doing so by supporting
initiatives led by organizations such as the World
Business Council for Sustainable Development
(WBCSD), the Natural Capital Coalition and the Social
Return on Investment (SROI) Network.
We believe that the IPL will be a valuable addition to
our public reporting and will become more and more
useful over the years when we can show a trend.
We also believe that monetization provides us with
the best available means to identify and compare
the material elements of our non-financial value
creation, and to build that understanding into our
decision making.
We are fully committed to collaborating with other
companies and organizations to share knowledge,
develop and enhance approaches, and work toward a
standardized, common methodology in the future.
The quantification of social and environmental impacts in financial terms is an emerging discipline. We will continue working with other interested parties to further develop robust and credible methodologies and use the tool to drive the implementation of the Holcim Sustainable Development Ambition 2030. The Group will now use the IPL as a discussion point and engagement tool with interested stakeholders, including investment analysts, to further improve our methodologies and test our assumptions.
We are fully committed to collaborating with other companies and organizations to share knowledge, develop and enhance approaches, and work toward a standardized, common methodology in the future.
7 Integrated Profit and Loss Statement 2014
INTRODUCTION THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
AN EMERGING DISCIPLINE
The Integrated Profit and Loss statement The IPL
* Not measured for 2014, but reflected, as we intend to measure in future IPLs.# No significant incidents in 2014.
The presentation of the IPL above a “compliance bar” shows that the methodology can be used to account for impacts resulting from
legally compliant operations that operate in line with international standards. It is not a replacement for social and environmental risk
management to ensure respect for those standards.
Year: 2014Scope: Holcim GlobalResults in: mio CHF
The IPL statement is a key milestone in measuring our sustainability aspirations, as set out in the Holcim Sustainable Development Ambition 2030. The IPL provides a consistent way to measure our progress over time. As we refine the tool, it will allow us to better analyze how externalities have an impact on the bottom line.
Bernard Mathieu Head of Sustainable Development, Holcim
Retained value
Stakeholder value
Strategic social investm
ents
Inclusive businesses
Industrial accidents
Occupationalhealth
Human
rights
Skills out
CO2 upstream
andow
n operations
CO2 dow
nstream
Air emissions
Water
Biodiversity
Waste
Secondary resources
Environmental
incidents
Triple-bottom-line
calculation
Triple bottom line can be used to assess opportunities beyond compliance
Compliance with governance, social and environmental requirements and standards
Financial
47 24
-76 –* –*
–*
–#
3
-3,555-297
-256 -129 -2
8554,617
5,671
2,332
Socio-economic Environmental
8 Integrated Profit and Loss Statement 2014
THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
INTRODUCTION
THE INTEGRATED PROFIT AND LOSS STATEMENT
What the IPL tells us
The IPL confirms that Holcim’s overall value to
society, taking into account the monetized impacts
in the socio-economic and environmental domains,
is significantly higher than the financial retained
earnings of the company. In particular, the “stakeholder
value” calculation shows that our contribution to local
economies through the multiplier effect of salaries,
and direct and indirect taxes is significant. By being
present, we considerably raise living standards and
job opportunities in the communities where we operate.
Safety remains one of our greatest challenges, and it
should remain our number one priority. The human
cost of an accident cannot be monetized, but even if
only considering the foregone capacity of a person
to generate income, the cost is considerable. We will
continue to strive to achieve our Safety Vision of
“Zero Harm to People.”
CO2 emissions have proven to have a large negative
impact. Holcim has invested and keeps investing to
reduce carbon emissions in manufacturing its products.
The challenge of carbon is, however, so large that it
requires us to look beyond own operations and explore
solutions to reduce carbon emissions along the whole
value chain of construction. In other words, Holcim
needs to develop and provide new products and
services which help the end users to reduce emissions.
This realization pushed Holcim to set new targets
and aspirations as part of the Holcim Sustainable
Development Ambition 2030, which include not only
carbon efficiency from operations but also emissions
avoided by customers through the use of our innovative
products. This requires close cooperation with other
players in the value chain (suppliers, customers,
designers, developers and regulators) to innovate
products and services offered. It also requires different
metrics, to be able to measure and track avoided
emissions. We are currently working on methodologies
to measure CO2 savings downstream and we are
confident that in future years we will be able to
demonstrate the positive contribution from innovative
products, services and applications.
It is difficult to reflect the positive benefits that
concrete offers, such as durability and resilience to
climate change. However, our IPL has shown us that the
entire product lifecycle needs to be considered, and we
will continue working to reflect this more accurately
in the future. Conversely, the IPL shows the positive
contribution from our use of secondary materials. We
anticipate that this contribution will increase as we
intensify the use of these materials.
Air emissions and water are two areas of continuous
improvement: we have seen from projects in India that we
can make a positive contribution in terms of water. The IPL
will allow us to track our contributions in these areas.
While the IPL clearly indicates some significant
challenges for us, it also points the way to exciting
opportunities. We see important opportunities to add
significant value through inclusive business projects,
such as the Sanitation for Life (S4L) project and Green
Building Centres in India. We will continue to work
on innovative products and solutions to reduce CO2
downstream and source secondary resources to replace
virgin raw materials.
The development and completion of the first IPL of Holcim is in itself an important achievement, as it created the opportunity to engage on sustainability topics at all levels of the organization, facilitating informed discussions among financial, environmental and social experts.
9 Integrated Profit and Loss Statement 2014
WHAT THE IPL TELLS USTHE IPL ASSUMPTIONS USED IN THE IPL CALCULATION
INTRODUCTION
Assumptions used in the IPL calculation
Financial dimension
Retained value
The sum of capital retained in the business calculated
by taking EBITDA and subtracting taxes, interest and
dividends. The relevant references in the Holcim Annual
Report 2014 are:
• EBITDA: CHF 4,156 – page 10 – Key figures Holcim Group.
• Taxes: CHF 588 – Consolidated Statement of Income
page 151 and page 183 note 14.
• Interest: CHF 515 – Financial expenses (CHF 611 – note 13
page 183) minus interest earned on cash and marketable
securities (CHF 96 – note 12 page 182).
• Dividends: CHF 721 – dividends paid on ordinary shares
(CHF 424) plus dividends paid to minority shares
(CHF 297) – both from cashflow statement page 156.
Socio-economic dimension
Stakeholder value – multiplied socio-economic impacts
The multiplier effect of cash transfers to employees
(salaries), governments (direct and indirect taxes such
as property and municipal taxes), creditors (interests)
and shareholders (dividends). This has been reflected
at a ratio of 1:1 on 2014 expenditure. This number has
been corrected for economic inefficiencies, based on
the countries in which Holcim operates.
The figure included for indirect taxes is a conservative
one, based on data collected from the seven countries
that represent around 60% of the total global indirect
tax charge.
We assume that every dollar transferred will be spent
and therefore contributes to the (local) economy. Even if
not all of the money transferred is spent, the assumption
of the 1:1 multiplier is justified due to secondary and
tertiary socio-economic ripple effects, caused by the
cash transfers through enhanced purchasing power.
Retained value reflects the real cost borne by the company.
10 Integrated Profit and Loss Statement 2014
ASSUMPTIONS USED IN THE IPL CALCULATION
THE IPL WHAT THE IPL TELLS USINTRODUCTION
Strategic social investment
Here, we consider the strategic social investment in
education, community development, infrastructure,
low-income housing and other projects. For each dollar
invested, an average multiplier effect is added. This
multiplier effect is estimated as follows, based on
independent sources:
• Education: Calculated by multiplying actual amount
spent in 2014 on education projects by a factor of 118%.
This figure was derived using the assumptions below.
Investments in education generate public returns
from higher income levels in the form of income taxes,
increased social insurance payments and lower social
transfers. We calculated a return on investment (ROI)
for education by linking the average private returns
of primary, secondary or high education to the average
capita income for high, middle and low-income
(G. Psacharopoulos and H.A. Patrinos, 20042).
We derived a formula (y=37,445x-0,071) connecting
ROI for education with national incomes (GDP). The
multiplier for education ROI used in the tool (118%) is
based on the world’s average GDP.
• Infrastructure: Calculated by multiplying the actual
amount spent in 2014 on infrastructure projects by
a factor of 250%. This figure was derived using the
assumptions below.
Several comprehensive economic reports analyze the
short- and long-term economic effects of investments,
quantifying how the money spent on infrastructure
has an impact on various sectors. Recent economic
studies suggested that infrastructure has one of the
largest multiplier effects on the economy, accounting
for the doubling or tripling of the initial investment (US
Congressional Budget Office estimate, The College of
William & Mary Thomas Jefferson Program in Public
Policy report3). The average ROI of 250% as a multiplier
is based on these estimates.
2 Source: G. Psacharopoulos and H.A. Patrinos (2004). Returns to Investment in Education: A Further Update. Available at: http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-1170954447788/3430000-1273248341332/20100426_16.pdf
3 BCG. The cement sector: a strategic contributor to Europe’s future. Available at: http://www.cembureau.be/sites/default/files/documents/The Cement Sector - A Strategic Contributor to Europe’s Future.pdf
We consider strategic social investment in education, community development, infrastructure, low-income housing and other projects.
11 Integrated Profit and Loss Statement 2014
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THE IPL WHAT THE IPL TELLS USINTRODUCTION
• Low-income housing: Calculated by multiplying the
actual amount spent in 2014 on low-income housing
projects by a factor of 231%. This figure was derived
using the assumptions below.
For this indicator, we used the Social ROI on low-income
housing evaluated by Salman & Aslam (2009) for a
case study in Pakistan4. The study evaluates the social
purpose benefit flow over five years, for a cumulative
number of plots sold, from 200 (Year 1) to 2,500 (Year 5),
assuming 80% occupation rate. It takes into account the
economic benefits of low-income housing (savings per
family household, additional income due to access to
mortgage finance, value of new employment generated
and potential gains from income-generation programs),
but also values social benefits (savings on medical bills
due to improved water access, waste management) as
well as environmental benefits (cost saving by waste
water treatment). The net present value (NPV) of social
and environmental benefits was compared to that of
project costs (operational and capital costs) to derive
the benefit cost ratio ROI of 231%.
• Community development/other projects: Calculated
by multiplying the actual amount spent in 2014 on
community development and other projects by a
factor of 267%. This figure was derived using the
assumptions below.
To measure the ROI for community development
projects, we used the ROIs for infrastructure (250%),
education (118%), low-income housing (231%) and
sanitation (550%)5 to calculate a weighted average
assuming that education projects account for 30%
of community development and infrastructure
investments and 20% of low income housing and
sanitation investments. The resulting multiplier we
used for community development ROI is 267%.
For these calculations, we assumed that the benefits
of these investments are directly earned in the year
of investment. In reality, benefits for society are
distributed over several years, but if we assume that
these investments occur regularly, then this approach
can be used.
For future calculations, we are considering developing
a methodology based on the number of direct
beneficiaries as an input factor. This would allow for a
more accurate reflection of efficiency gains in strategic
social investments and be better aligned with the
Holcim Sustainable Development Ambition aspiration
(aiming to improve 100 million lives by 2030).
In addition, the following strategic social contributions are
accounted for here, using the infrastructure multiplier:
• strategic partnership with the International Committee
of the Red Cross (ICRC), supporting water and habitat
projects in conflict-affected settings
• Holcim Foundation for Sustainable Construction,
providing seed funding and prize money to cutting-
edge projects of innovative architects.
Inclusive business
Calculated by multiplying the actual amount spent
in 2014 on shelter projects by 391% and livelihood
projects by 184%. These figures were derived using
the assumptions below.
Inclusive business reflects business solutions for
low-income customers in the areas of shelter
(low-income housing, sanitation) and livelihood
(employability, supply chain and distribution chain).
Currently, the same quantification method as for
strategic social investment is used: investment plus
multiplier effect to account for environmental and
socio-economic benefits spin-off effects. The multiplier
for shelter is based on the average between the ROI for
low-income housing and sanitation, and the multiplier
for livelihood on the average between the ROI for
education and infrastructure.
For future calculations, we are considering developing
a methodology based on the number of low-income
customers or partners as an input factor.
4 A. Salman & J. Aslam (2009). Property rights: ensuring well-being through low-income. Available at: http://static.wamda.com/web/uploads/resources/Property_rights_for_low-income_housing_7yhjY3fi.pdf
5 G. Hutton (2012). Global costs and benefits of drinking-water supply and sanitation interventions to reach the MDG target and universal coverage. Available at: www.who.int/water_sanitation_health/publications/2012/globalcosts.pdf
12 Integrated Profit and Loss Statement 2014
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THE IPL WHAT THE IPL TELLS USINTRODUCTION
Industrial accidents
Calculated by multiplying the number of fatalities by
CHF 780 168 and injuries by CHF 33 789. These figures
were derived using the assumptions below.
The figure calculated reflects the economic costs due
to injury or loss of life. Costs include social cost for
the victim such as loss of current and future income,
and medical costs. Further, we have included the costs
for community, including lost revenue, social welfare
payments and rehabilitation costs.
Costs for the employer were not taken into account,
since these are already reflected in the financial section
of the IPL.
For fatalities and injuries, the data was based on an
Australian research group (Safe Work Australia 2012)6.
The data was adjusted for GDP, based on the countries
Holcim operates in.
Occupational health
This element was not quantified in 2014.
For future calculations, we aim to develop a
methodology to account for lost income-generating
capacity based on occupational health impacts
(e.g. stress-related diseases, ergonomics).
Human rights
Not quantified in 2014.
The objective of this category is to account for any
potential adverse human rights impacts in the reporting
year. A methodology needs to be developed, taking
into account the results of internal human rights
assessments and reports received through processes
such as an integrity line. Positive human rights impacts
(e.g. human rights education for subcontractors) can
also be included here.
Skills out
Calculated by multiplying the total training spend in
2014 by the annual turnover rate and the social return
rate on education.
This approach enables us to estimate the wider social
benefits of training (i.e. social benefits felt by our former
employees). The benefits of training felt by those people
who remain at Holcim will be visible internally through
efficiency gains and increased revenues.
6 http://www.safeworkaustralia.gov.au/sites/SWA/about/Publications/Documents/660/Cost of Work-related injury and disease.pdf
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THE IPL WHAT THE IPL TELLS USINTRODUCTION
Environmental dimension
CO2 upstream and own operations
Calculated by multiplying the tonnes of absolute gross
CO2 emissions by USD 29 (CHF 27). This figure was
derived using the assumptions below.
The amount of CO2 considered corresponds to our absolute
gross emissions (Scope 1, 2 and 3) over a full calendar year.
The total tonnes of CO2 are multiplied by its societal value,
which we assumed to be 29 USD/tonne (t) in 2014.
We acknowledge that there are a large range of
estimates of the CO2 societal value. We based our
figure on the Stern report (assuming 25 USD/t in 2007,
and then inflating it to reflect the seven years that had
elapsed), combined with prevalent assumptions used by
governments that internalize the cost of CO2.
Notably, for the purposes of comparison, we considered
that, in its impact assessment of the Emission Trading
Directive, the European Commission assumes a price
of CO2 of 30 €/t in 2020. In addition, based on the
analysis made by the Environmental Protection Agency,
and with an intermediate discount factor of 3%, the
corresponding value of CO2 is 32 USD/t.
CO2 downstream
Not quantified in 2014.
We aim to develop a methodology to account for CO2
savings along the value chain thanks to the use of our
product compared to ordinary solutions.
Air
The damage costs of air pollutants were retrieved
from studies using the Impact Pathway Analysis to
measure the relationship between the concentration of
a pollutant and its impacts on affected receptors (social
and environmental) and monetize the damages.
The social and damage costs of emissions were
calculated as follows:
• Particulate matters: Calculated by multiplying the
emissions in 2014 by a monetary figure derived using
the assumptions below.
The respective values used can be found in the annex.
The damage costs of particulate matters (e.g. SOx,
NOx and VOCs) were based on a study7 considering
five impacts: negative health effects; reduced crop
yields; material corrosion; effects on timber; and
acidification of waterways.
Health costs were estimated based on the value of a
statistical life and accounted for the majority of the
total cost of air pollution, mainly resulting from the
effects associated with fine particles and ground-
level ozone pollution.
This study is based on global assumptions, using
global averages for emission factors, without taking
into account the varied dispersion of air pollutants,
differences in ambient air pollution levels or local
specific factors. The study also considers that dose-
response functions for health impacts are linear at
the population level, while the use of five categories
may underestimate the true extent of the damage.
However, this approach can be used as a first
approximation to value air pollution impacts.
7 Trucost Plc (2013). Natural Capital at Risk: The Top 100 externalities of business. Available at: www.naturalcapitalcoalition.org/js/plugins/filemanager/files/TEEB_Final_Report_v5.pdf
14 Integrated Profit and Loss Statement 2014
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THE IPL WHAT THE IPL TELLS USINTRODUCTION
• Heavy metal emissions: Calculated by multiplying the
emissions in 2014 by a monetary figure derived using
the assumptions below. The respective values used can
be found in the annex.
The damage costs of heavy metal emissions (Hg,
Pb, Cd, As, Cr and Ni) and organic micro-pollutants
(dioxins and furans) were determined from a study
evaluating damage costs based on national averages
for 32 countries, related to health effects from
ingestion and inhalation (cancers but also neuro-toxic
effects leading to IQ loss, as well as subsequent loss
of earnings potential for Pb and Hg)8.
The analysis quantified burden, dispersion and
exposure (deposition velocities) to assess uptake by
plants and animals and the impact on the human
body (via consumption of tap water, agricultural
crops or animal products).
The damage costs were then calculated by multiplying
physical impacts by the appropriate cost:
• the unit cost for cancer includes medical expenses,
wage and productivity losses, and the willingness to pay
to avoid the pain and suffering inflicted by the disease
• the unit cost for IQ includes expenses associated with
remedial learning and loss in potential lifetime earnings
(costs are discounted at 3% but without consideration
given to increases in willingness to pay with economic
growth in future years).
The study does not consider the effects of groundwater
contamination, adjustment of ingestion dose to
account for food preparation and the implementation
of remedial strategies (e.g. filtration for tap water) or
the potential contribution of heavy metals and organic-
micro pollutants to other impacts of fine particulate
matter. Therefore, total impact attributed to these
pollutants can be underestimated, but data from this
study is used as an approximation to value their impacts.
Water
Calculated by multiplying the amount of water
consumed in own operations by CHF 4.32/m3 and the
amount of water harvested by CHF 3.44/m3. These costs
were derived using the assumptions below.
The societal cost of water is calculated based on scarcity
level of the location where water is consumed or
harvested. The (site-specific) scarcity price is provided
by a 2013 Trucost report and the local scarcity level is
determined by the Aquastat tool from the Food and
Agriculture Organization9. Since water is withdrawn and
harvested in different locations, the resulting average
cost per cubic meter is different.
8 EEA (2011). Revealing the cost of air pollution from industrial facilities in Europe. Available at: www.eea.europa.eu/publications/cost-of-air-pollution
9 www.naturalcapitalcoalition.org/js/plugins/filemanager/files/TEEB_Final_Report_v5.pdf
We consider the societal value of CO2, air pollutants and other emissions, water, biodiversity and waste.
15 Integrated Profit and Loss Statement 2014
ASSUMPTIONS USED IN THE IPL CALCULATION
THE IPL WHAT THE IPL TELLS USINTRODUCTION
Biodiversity
Calculated by multiplying the net amount of hectares
impacted (either disturbed or rehabilitated) by
CHF 4,546/ha. These figures were derived using the
assumptions below.
The net area rehabilitated or disturbed is calculated by
subtracting the total hectares of rehabilitated land from
the total hectares of disturbed land.
These figures do not apply to the changes observed in the
reporting year, but to the total number of hectares under
company responsibility. The evaluation is based on an
estimated distribution of habitats: in forests; shrublands/
woodlands; grasslands; ruderal habitats; bare rocks;
wetlands; rivers/streams; lakes/ponds; mangroves; salt
marshes; coastal zones; and cultivated land.
Based on a 2009 Economics of Ecosystems and
Biodiversity (TEEB) report10, and based on the estimated
habitat distribution of impacted land, the weighted
average estimated annual restoration benefits are
between USD 1,010/ha and USD 73,900/ha.
Waste
Calculated by multiplying the amount of waste
landfilled by CHF 22/t and waste incinerated by
CHF 29/t. These figures were derived using the
assumptions below.
This element covers production waste (bypass dust,
cement kiln dust, sludge and returned concrete), as well
as reduced landfill thanks to co-processing of waste in
the cement kiln.
The baseline is assumed to be 80% landfill and 20%
incineration. The CO2 saved from the replaced fossil fuel
is accounted for under CO2. A price of USD 22.36/Mt is
assumed for the damage cost per tonne of waste11.
Secondary resources
Calculated by multiplying the amount of alternative
fuels and raw materials used by CHF 23/t and industrial
mineral components (IMC) and alternative aggregates
by CHF 22/t. These figures were derived using the
assumptions to follow.
This category includes alternative fuels and raw
materials, mineral components (MIC), and reported
alternative and recycled materials from ready-mix
concrete (RMX) and aggregates, including asphalt.
To value the environmental impact of these secondary
resources, the weighted average of the external cost of
waste incinerated and waste landfilled (assuming 80%
landfill and 20% incineration) was used for alternative
fuels and raw materials, and the external cost of
waste landfilled to value industrial MIC and alternative
aggregate (Rabl, Spadaro and Zoughaib, 2008)11.
Environmental incidents
Not quantified in 2014.
The objective of this category is to account for any
potential environmental incidents related to our
operations (such as spills or fires) in the reporting year.
A valuation methodology will be developed.
10 www.teebweb.org/wp-content/uploads/Study%20and%20Reports/Additional%20Reports/TEEB%20climate%20Issues%20update/TEEB%20Climate%20Issues%20Update.pdf
11 A. Rabl, J. V. Spadaro and A. Zoughaib (2008) Environmental Impacts and Costs of Solid Waste: A Comparison of Landfill and Incineration. Available at: www.stefanomontanari.net/sito/images/pdf/spadaro.pdf
16 Integrated Profit and Loss Statement 2014
ASSUMPTIONS USED IN THE IPL CALCULATION
THE IPL WHAT THE IPL TELLS USINTRODUCTION
Domain Topic Indicator Base price/multiplier Unit Base
yearInflation
factor*
Price/multiplier
adjusted for inflation
Price/ multiplier
used for calculation
in CHF**
Soci
o-ec
onom
ic
Industrial accidents
Number of fatalities See page 13 for details
Number lost time injuries See page 13 for details
Strategic social investments
Education 118% % 2014 1.000 118% 118%Community development and "other" projects 267% % 2014 1.000 267% 267%
Low-income housing (SSI) 231% % 2014 1.000 231% 231%
Infrastructure 250% % 2014 1.000 250% 250%
Inclusive business
Sanitation 550% % 2014 1.000 550% 550%
Shelter (products and services) 391% % 2014 1.000 391% 391%Livelihood (employability, supply chain, distribution channels) 184% % 2014 1.000 184% 184%
Stakeholder value
Salary
100.00%
% 2014 1.000 100% 100%
Finance cost % 2014 1.000 100% 100%
Tax % 2014 1.000 100% 100%
Indirect tax % 2014 1.000 100% 100%
Dividend % 2014 1.000 100% 100%
Envi
ronm
enta
l
CO2 upstream CO2 upstream & own operations 25 USD/tonne 2007 1.173 29 27
Air
PM 8,080 USD/tonne 2009 1.100 8,884 8,174
SOx 1,445 USD/tonne 2009 1.100 1,589 1,462
NOx 1,325 USD/tonne 2009 1.100 1,457 1,340
VOC 845 USD/tonne 2009 1.100 929 855
Dioxins and furans 27,000 EURO/g 2009 1.100 29,668 27,313
Hg 1,885,000 EURO/tonne 2009 1.092 2,058,600 2,490,906
Cd 29,000 EURO/tonne 2009 1.092 31,671 38,322
As 349,000 EURO/tonne 2009 1.092 381,141 461,181
Pb 965,000 EURO/tonne 2009 1.092 1,053,872 1,275,185
Cr 38,000 EURO/tonne 2009 1.092 41,500 50,215
Ni 3,800 EURO/tonne 2009 1.092 4,150 5,021
WaterWater consumed – own operations 4.27 USD/m3 2009 1.100 4.70 4.32
Water harvested 3.40 USD/m3 2009 1.100 3.73 3.44
BiodiversityHectares disturbed 4,211 USD/ha 2007 1.173 4,941 4,546
Hectares rehabilitated 4,211 USD/ha 2007 1.173 4,941 4,546
WasteWaste landfilled 21 USD/tonne 2008 1.141 24 22
Waste incinerated 28 USD/tonne 2008 1.141 32 29
Secondary resources
Alternative fuels and raw materials 22 USD/tonne 2008 1.141 26 23
Industrial mineral components 21 USD/tonne 2008 1.141 24 22
Alternate aggregates 21 USD/tonne 2008 1.141 24 22
AnnexValues used in the IPL
* Costs and benefits were adjusted for inflation.** USD converted at CHF 0.92, Euro converted at CHF 1.21 and AUD at 0.8.
THE IPL WHAT THE IPL TELLS US ASSUMPTIONS USED IN THE IPL CALCULATION
INTRODUCTION
17 Integrated Profit and Loss Statement 2014
Contact us at Holcim
HolcimBernard MathieuHead of Sustainable DevelopmentPhone +41 58 858 54 61sustainable.development@holcim.com
HolcimPier GribaudiHead of Climate Protection and SD InitiativesPhone +41 58 858 54 61pier.gribaudi@holcim.com
The IPL statement is not part of Holcim’s financial reporting or projections. The IPL is intended to raise awareness of externalities that may or may not affect Holcim’s business, and to assess their relative importance. It contains preliminary considerations which may be subject to change. Furthermore, the IPL may also change, for example, as valuation techniques and methodologies evolve. It should be considered as indicative and it does neither represent any final factual conclusions nor is it intended to assert any factual admission by any person regarding the impact of Holcim or any of its related parties on environment or society.
Disclaimer
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